No-Fault Reform: Why Coverage Caps Don't Help

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Michigan’s No-Fault auto insurance provides top-quality coverage for medically necessary treatment resulting from car accidents. But that coverage does come with a slightly higher price tag. Now legislators in both the House and Senate have proposed changes to the No-Fault laws claiming that they will lower the cost. But a closer look at bills shows that the only ones saving money if they become law will be the insurance companies.

According the Michigan Association for Justice, uncapped no-fault benefits cost the average Michigan driver $544.20 per year – only $60 higher than the national average. For the cost of a nice dinner for two, Michigan drivers know that if the unthinkable occurs all their medically necessary treatments will be covered, no matter how high the cost.

Under the House bill, those payments would stop as soon as the total bill reached $1 million. One proposed amendment would raise the number to $10 million, but lower caps apply to motorcycle accidents, uninsured victims, and non-residents.

The problem is that there is nothing stopping the insurance providers from pocketing the difference. While the House bill proposes a short, 2 year, 10% decrease in premiums, this amounts to a mere $54 per year. At the same time, other provisions of the reform bill would impose increased administration fees to offset it.

The bill also does little to address what happens to those whose medical bills hit the new coverage ceiling. Because those individuals are the most seriously hurt, the additional cost of their healthcare will quickly eat through any savings. Then their medical costs will be passed on to the taxpayers though Medicaid.

Rather than providing savings to Michigan drivers who may be struggling to pay their No-Fault coverage, the House reform bill lowers the amount the insurance companies have to pay and shifts the cost of those with catastrophic injuries onto the taxpayers. The proposed law does nothing to limit drivers’ premiums or the actual cost of treatment. Instead it is a windfall to insurance companies who are trying to have their cake and eat it too. If you want to protect your access to top-quality automobile insurance, call your representative today and tell him or her that No-Fault reform is no good for Michigan drivers.